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'People's bank' at Post Office gets Mandleson's backing

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  • 'People's bank' at Post Office gets Mandleson's backing

    Mandelson backs new 'people's bank' at Post Office

    Plan could head off privatisation row
    Branches to offer loans and debit cards

    A groundbreaking "people's bank", offering a full range of financial services and using the UK network of 12,000 post offices, is being promoted by Peter Mandelson, the business secretary.

    The plan to use the remaining post office outlets as the backbone of a new national bank would head off a Labour revolt over Royal Mail privatisation and provide the country with a fiscal impetus. Last night Pat McFadden, the minister for postal affairs, said he was keen to expand their operations and allow them to function more like fully fledged banks, but with a clear social purpose.

    "I am warm about the idea," he said. "The secretary of state [Lord Mandelson] has said he wants to see a stronger role for the Post Office. This is something we are working on. We have asked the business and enterprise select committee to look into this."

    The Post Office already offers some banking services and bill payments. In 2004 it linked up with the Bank of Ireland in a joint venture that allowed it to offer credit cards, mortgages and personal loans. Last year it was re-awarded a contract to run the card account that distributes benefits and pensions to 4.3 million claimants.
    But under proposals submitted to the select committee last week by a powerful coalition of business groups, MPs and unions, the new state-owned "people's bank" would do far more, offering all the debit-card facilities, current accounts, savings plans, loans, business services and financial advice currently available in main city-centre banks.

    The ideas are being worked on as part of a package that they hope will persuade rebel Labour MPs and peers to abandon their fierce opposition to legislation on the part-privatisation of Royal Mail, the parent company of Post Office Ltd.

    More than 100 Labour MPs have signed a House of Commons motion demanding that the government drop plans to sell off part of Royal Mail to a foreign operator - a move they believe will lead to further dismantling of the country's most cherished public service. They also fear a part sale will lead to rising prices, the erosion of the "universal service" of six-days-a-week postal deliveries and collections, and the closure of thousands more local post offices. Ministers have been alarmed by the extent of opposition to their privatisation plans, both in the Commons and Lords, and fear Gordon Brown's premiership, and the run-up to an election, could be scarred by a mass revolt.

    In a further sign of their willingness to compromise, ministers have also backed away from plans to sell a 49% stake in Royal Mail and now say the most they expect to hive off will be 30-35%. But they remain adamant that private-sector capital and expertise must be brought in to shake up the company. The favourite to take a stake is Dutch operator TNT.

    MPs opposed to part-privatisation last night gave a cautious welcome to the plans. John Grogan, Labour MP for Selby, said deep public cynicism about the performance of private banks had highlighted the need for a state-run bank that people could trust. "The question that many Labour backbenchers will ask is that, if public-sector managers are good enough to run a 'people's bank' as a successful public enterprise, why can't they do the same with the Royal Mail?" Grogan said.

    Billy Hayes, general secretary of the Communication Workers' Union (CWU), which is opposed to part-privatisation, said: "The people's bank is an idea whose time has come." Ministers now needed to ensure that all of Royal Mail remained in public ownership.

    Lindsay Mackie, of the New Economics Foundation, which has helped drive forward the plans with the CWU, the Federation of Small Business and the centre-left pressure group Compass, said: "It's great that the government is listening to the huge sweep of public, parliamentary, union and business opinion in favour of a trusted 'Post Bank'.

    "It would be even better if ministers could now say that they are completely committed to an expanding, innovative Post Office network, with no more closures."


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